Perception

& individual
decision
making
Dr. Smita Gupta
Assistant Professor
Welingkar Institute of Management Development & Research
Bangalore
 Attribution theory
 Attribution theory explains the ways in which we judge people
differently, depending on the meaning we attribute to a given behavior.

 When we observe an individual’s behavior, we want to determine

whether it was externally or internally caused.

 This determination depends on three factors:

 Distinctiveness
 Consensus
 Consistency
 Attribution theory
 Internally caused behaviors are those we believe to be under the
personal control of the individual.

 Externally caused behavior is what we imagine the situation forced the

individual to do.

 For example, if one of your employees is late for work, you may attribute
that to his partying into the wee hours and then oversleeping. This is
internal attribution.

 But if you attribute lateness to an automobile accident that tied up

traffic, you are making an external attribution.
 Attribution theory
 Distinctiveness refers to whether an individual displays different
behaviors in different situations.

 Is the employee who arrives late today also one who regularly “blows
off” commitments?

 If the person’s behavior is unusual, we are likely to give it an external

attribution.

 If its not, we will judge the behavior to be internal.

 Attribution theory
 If everyone who faces a similar situation, responds in the same way, we
may say that the behavior shows consensus.

 The behavior of our tardy employee meets the criterion if all employees
who took the same route were also late.

 If consensus is high, you would give an external attribution to the

employee’s tardiness.

 However, if other employees who took the same route made it to work
on time, you would attribute his lateness to an internal cause.
 Attribution theory
 An observer looks for consistency in a person’s actions.

 Does the person respond the same way over time?

 Coming in 10 minutes late for work is not perceived in the same way for
an employee who has not been late for months as it is for an employee
who is late two or three times a week.

 The more consistent the behavior, the more we are inclined to attribute it
to internal causes.
 Attribution theory
 For example, if an employee, Sheila Khanna generally…

 Performs at about the same level on related tasks as she does on her
current task {Low distinctiveness}…

 Other employees frequently perform differently – better or worse – than

Sheila on that task {Low consensus}…

 And Sheila’s performance on this current task is consistent over tiem

{High consistency}…

 Anyone judging Sheila’s work will likely hold her responsible for her
task performance {Internal Attribution}.
 Attribution theory
 One of the most interesting findings from attribution theory research is
that errors or biases distort perceptions.

 When we make judgements about the behavior of other people, we tend

to underestimate the influence of external factors and overestimate the
influence of internal or personal factors.

 This fundamental attribution error explains why a sales manager is

prone to attribute the poor performance of her sales agents to laziness
rather than to the innovative product line introduced by a competitor.
 Attribution theory
 Individuals and organizations also tend to attribute their own successes
to internal factors such as ability or effort.

 They blame failure on external factors such as bad luck or unproductive

coworkers.

 People also tend to attribute ambiguous information as relatively

flattering and accept positive feedback while rejecting negative
feedback.

 This is the self serving bias.

 A US News & World Report shows its power.

 Attribution theory
 This is the self serving bias.

 A US News & World Report shows its power.

 Researchers asked one group of people:

 “If someone sues you and you win the case, should he pay your legal costs?”

 Eighty five percent responded “Yes”!

 Another group was asked:

 “If you sue someone and lose the case, should you pay his costs?”

 Only 44 percent answered “yes”!

 Attribution theory
 Cultural Differences in Attribution

 Evidence on cultural differences in perception is mixed.

 There are differences across cultures in the attributions people make.

 One study found Korean managers less likely to use the self – serving bias.

 They tended to accept responsibility for group failure “because I was not a
capable leader” instead of attributing failure to group members.

 Asian managers are more likely to blame institutions or whole organizations.

 Western observers believe individual managers should get praise or blame.

 Attribution theory
 Cultural Differences in Attribution

 This explains why US newspapers prominently report the names of

individual executives when firms do poorly.

 Asian media cover how the firm as a whole has failed.

 This tendency to make group based attributions also explains why

individuals from Asian cultures are more likely to make group based
stereotypes.
common shortcuts in judging
others

 Selective Perception

 Halo effect

 Contrast effect

 Stereotyping
common shortcuts in judging
others
 Selective Perception

 Any characteristic that makes a person, an object or an event stand out

will increase the probability we will perceive it. Why?

 Because it is impossible for us to assimilate everything we see.

 So we engage in selective perception.

 We do not choose randomly. We select based on our interests,

background, experience and attitudes.
common shortcuts in judging
others
 Selective Perception

 A classic study shows how vested interests can significantly influence

which problems we see.

 Dearborn and Simon asked 23 business executives (6 in sales, 5 in

production, 4 in accounting, and 8 in miscellaneous functions) to read a
comprehensive case describing the organization and activities of a steel
company.

 Each manager was asked to write down the most important problem in
the case.
common shortcuts in judging
others
 Selective Perception

 A classic study shows how vested interests can significantly influence

which problems we see. (Contd.)

 Eighty three percent of the sales executives rated sales important; only 29
percent of the others did so.

 The study concluded that participants perceived as important the aspects

of a situation specifically related to their own unit’s activities and goals.

 A group’s perception of organizational activities is selectively altered to

align with the vested interests the group represents.

 {You may write this example briefly in your own words.}

common shortcuts in judging
others
 Halo effect

 When we draw a general impression about an individual on the basis of

a single characteristic, such as intelligence, sociability or appearance, a
halo effect is operating.

 If you’re a critic of Narendra Modi, try listing ten things you admire
about him. If you’re an admirer, try listing 10 things you dislike about
him.

 No matter which group describes you, you may not find this an easy
exercise!

 This is the halo effect: our general views contaminate our specific ones!
common shortcuts in judging
others
 Halo effect

 The halo effect was confirmed in a classic study in which subjects were
given a list of traits such as intelligent, skillful, practical, industrious,
determined, and warm and asked to evaluate the person to whom those
traits applied.

 Subjects judged the person to be wise, humorous, popular, and

imaginative.

 When the same list was modified to include “cold” instead of “warm”, a
completely different picture emerged.

 The subjects were allowing a single trait to influence their overall

impression of the person they were judging.
common shortcuts in judging
others
 Contrast effect

 A contrast effect can distort perceptions.

 We do not evaluate a person in isolation.

 Our reaction is influenced by other persons we have recently

encountered.
common shortcuts in judging
others
 Contrast effect

 In a series of job interviews, interviewers can make distortions in any

given candidate’s evaluation as a result of his or her place in the
interview schedule.

 A candidate is likely to receive a more favorable evaluation if preceded

by mediocre applicants and a less favorable evaluation if preceded by
strong applicants.
common shortcuts in judging
others
 Stereotyping

 When we judge someone on the basis of our perceptions of the group to

which he or she belongs, we are using the shortcut called “stereotyping”.

 We rely on generalizations everyday as they help us make decisions

quickly. They are a means of simplifying a complex world.

 It is less difficult to deal with an unmanageable number of stimuli if we

use heuristics or stereotypes.

 In organizations, we frequently hear comments that represent

stereotypes based on gender, age, race, religion, ethnicity.
common shortcuts in judging
others
 Stereotyping

 “Men aren’t interested in child care.”

 “Older workers cant learn new skills”.
 “Asian immigrants are hardworking and conscientiousness.”

 Research suggests that stereotypes operate emotionally and below the

level of awareness.

 This makes them very hard to challenge and change.

 Specific applications of
shortcuts in organizations

 People in organizations are always judging each other.

 Managers must appraise their employees’ performance.

 We evaluate how much effort our co workers are putting into their jobs.

 Team members immediately “size up” a new person.

 Our judgements have important consequences for the organization.

 Specific applications of
shortcuts in organizations
 Employment Interview

 Interviewers make perceptual judgements that are often inaccurate and

draw early impressions that quickly become entrenched.

 Research shows we form impressions of others within a tenth of a

second, based on our first glance.

 If these first impressions are negative, they tend to be more heavily

weighed in the interview than if the same information came out later.

 Most interviewers’ decisions change very little after the first 4 or 5

minutes of an interview.
 Specific applications of
shortcuts in organizations
 Performance Expectations

 People attempt to validate their perceptions of reality even when these

are faulty.

 The terms self fulfilling prophecy and Pygmalion Effect describe….

 How an individual’s behavior is determined by others’ expectations.

 If a manager expects big things from her people, they’re not likely to let
her down.

 If she expects only minimal performance, they are likely to meet those
low expectations.
 Specific applications of
shortcuts in organizations
 Performance Evaluation

 Performance evaluations depend on the perceptual process.

 An employee’s future is closely tied to the appraisal – promotion, pay

raises and continuation of employment are the outcomes.

 Appraisal may be objective, for example, a sales person is appraised on

how many dollars of sales he generates in his territory.

 However, many jobs are evaluated in subjective terms.

 Subjective evaluations may be problematic as all errors discussed above

influence them.
Link between perception and
individual decision making
 Individuals in organizations make decisions – choices from among two
or more alternatives.

 Top managers determine their organization’s goals

 What products or services to offer
 How to best finance operations
 Where to locate a new manufacturing plant

 Middle and lower level managers set production schedules, select new
employees and decide how to allocate pay raises.

 Non managerial employees decide how much effort to put forth at work
and whether to comply with a boss’s request.
Link between perception and
individual decision making
 Individual decision making is thus an important part of OB.

 The way individuals make decisions and the quality of their choices are
largely influenced by their perceptions.

 Decision making occurs as a reaction to a problem.

 A discrepancy exists between the current state of affairs and some

desired state.

 This may require us to consider alternative courses of action.

 Throughout the decision making process, perceptual distortions often

surface that can bias analysis and conclusions.
 Decision making
 Business schools train students to follow rational decision making
models.

 OB helps us to improve the ways we make decisions in organizations.

 To understand the decision making errors people commit.

 Decision making
 The Rational Model

 The best decision maker is rational and makes consistent, value

maximizing choices within specifies constraints.

 These decisions follow a six step rational decision making model.

 Define the problem

 Identify the decision criteria
 Allocate weights to the criteria
 Develop the alternatives
 Evaluate the alternatives
 Select the best alternative
 Decision making
 The rational decision making model relies on a number of assumptions:

 Decision maker has complete information

 She is able to identify all the relevant options in an unbiased manner
 She chooses the options with the highest utility

 Most decisions in real world don’t follow the rational model.

 People are usually content to find a reasonable or acceptable solution to

a problem rather than an optimal one.

 “Most significant decisions are made by judgement, rather than by a

defined prescriptive model”.
 Decision making
 Bounded Rationality

 Our limited information processing capability makes it impossible to

assimilate and understand all the information necessary to optimize.

 Most people react to a complex problem by reducing it to a level at

which they can readily understand it.

 Many problems don’t have an optimal solution because they are too
complicated to fit the rational decision making model.

 So people satisfice; they seek solutions that are satisfactory and

sufficient.
 Decision making
 Bounded Rationality

 Since the human mind cannot formulate and solve complex problems,
we operate within the confines of Bounded Rationality.

 We construct simplified models that extract the essential features from

problems without capturing all their complexity.

 We can then behave rationally within the limits of the simple model.
 Decision making
 Intuition

 The least rational way of making decisions is intuitive decision making.

 Intuition is an unconscious process created from distilled experience.

 It occurs outside conscious thought.

 Its fast and its affectively charged, meaning it usually engages the
emotions.
 Common biases & errors in
Decision making
 Overconfidence Bias

 “No problem in judgement and decision making is more prevalent and

more potentially catastrophic than overconfidence”.

 When we are given factual questions and asked to judge the probability
that our answers are correct, we tend to be far too optimistic.

 A negative relationship exists between the entrepreneurs’ optimism and

the performance of their new venture: the more optimistic, the less
successful.
 Common biases & errors in
Decision making
 Anchoring Bias

 Tendency to fixate on initial information and fail to adequately adjust

for subsequent information.

 It occurs since our mind gives a disproportionate amount of emphasis to

the first information it receives.

 Anchors are widely used by people in professions in which persuasion

skills are important.
 Common biases & errors in
Decision making
 Confirmation Bias

 We actually selectively gather information and not “objectively” as the

rational decision making model assumes.

 The confirmation bias represents a specific case of selective perception.

 We seek out information that affirms our past choices, and we discount
information that contradicts them.

 We also accept at face value information that confirms our preconceived

views, while we are critical and skeptical of information that challenges
them.
 Common biases & errors in
Decision making
 Availability Bias

 Our tendency to base judgements on information readily available.

 Escalation of Commitment

 Refers to staying with a decision even when there is clear evidence it is

wrong.
THANKS